[Balbir Singh vs. State of U.P. and Ors. AIR 2012 Allahabad 113]
A partnership firm in the name and style of M/s Guru Govind Singh Rice Mills was constituted on 25.3.1975 consisting of petitioner and six others partners. The said partnership stood dissolved on 29.10.1984. A fresh partnership deed was executed by the petitioner with one of his ex-partners and three other partners of the dissolved firm in the name and style of M/s UP National & General Rice Mills.
One of the partners died, as a consequence of which the firm was dissolved. In this behalf, a deed of dissolution was executed between the petitioner and four partners and legal heirs of the deceased person. Two partners received a sum of Rs.1.80 and Rs.1 lakh respectively towards their share in the capital of the dissolved firm. The other two partners namely Balbir Singh and Rajesh Kumar received their shares in the shape of assets i.e. land, building, plant, machinery. After dissolution of the firm, petitioners and other partners, Rajesh Kumar entered into a fresh partnership in the name and style of the earlier dissolved firm namely UP National & General Rice Mills, which is in existence.
Report of the Deputy Registrar (Stamp) suggested that there was shortage of levy of stamp of 84,990/- and shortage in the registration fee amounting to Rs. 14,660/-. Notice was issued by Addl. Collector. A detailed reply was filed by the petitioner indicating that there was no transfer of movable or immovable property while effecting the dissolution of the firm. It was purely a share received by the petitioner upon the dissolution of the partnership and as such did not constitute ‘Conveyance’ as defined u/s 2(10) of the Indian Stamp Act. The plea of the petitioner was rejected by the Addl. Commissioner, Stamp. The appeal was also dismissed.
On further appeal, the High Court observed that in order to attract provision of explanation to section 2(10) of Stamp Act, an essential feature is that a person who is transferring his right in the property, should have a definite and assigned share in the property before its transfer to other partners. There is no assigned or definite share of the partners in the movable or immovable assets and assigning of shares on dissolution is done on the basis of the shares which the partners hold in the firm. By no stretch of imagination, does it fall within the explanation of section 2(10) of the Stamp Act.
Receipt of the assets of the firm on dissolution would not be construed as conveyance as contemplated u/s 2(10) of the Stamp Act, as the error in construing the same as conveyance/transfer is based upon the premise of treating the status of member of the partnership firm with that of a person holding joint property with definite shares. The finding that on account of dissolution of firm the assets which are distributed by the partners amongst themselves or in favour of some person who has retired from the partnership would constitute the transfer as defined in the Transfer of Property Act, is wrong.
Where the immovable properties had been allotted in the deed of dissolution to the releasees and therefore, the consequential deed of release was only based on the dissolution and in such circumstances, the document could never be treated as a conveyance. The immovable properties had been allotted in the deed of dissolution to the partners. The deed of release was only a sort of acknowledgement of the title of the partners to the immovable properties which was conferred on them by the deed of dissolution. It could not, by any stretch of imagination, be treated as a conveyance of the properties, because the releasors had no right to the properties at the time of the release. In that view, the document could not be treated as a conveyance and stamp duty cannot be demanded on that basis.
